Dollar falls near one-month low to yen as inflation tests continue

Dollar falls near one-month low to yen as inflation tests continue

The dollar held a three-day loss against major peers and traded near a one-month low to the yen on Wednesday, with highly anticipated U.S. inflation data that could be the starting of a Federal Reserve interest rate increase.

The China would release readings on consumer and producer prices on Wednesday, which could sway the direction of policy there as property sector woes threaten the broader economy.

The dollar index, which measures the dollar against six rivals, was little changed at 93.970 after it went from a more than one-year peak at 94.634 reached Friday.

The currency went up to 112.73 on Tuesday for the first time since Oct. 11.

The euro was going to be flat at $1.15925, maintaining a three-day gain that brought it close to the month's high of $1.16165.

Economists polled by Reuters say October's U.S. consumer price index gained 0.6% from the previous month's 0.2% rise, with the core measure gaining 0.3 percentage point to 4.3%, well above the Fed's annual 2% inflation target.

The dollar index would break out the top of the range of 94.50, according to a client note by Chris Weston, head of research at Pepperstone in Melbourne.

While the dollar is rising against the dollar, if the U.S. CPI comes in hot, this risks to USDJPY shorts, he wrote.

Wednesday's inflation readings from the world's two biggest economies will be the main indicator of whether rising price pressures are accelerating globally.

In October, U.S. producer prices increased strongly, indicating that high inflation could remain for a while amid tight supply chains related to the pandemic.

The US Treasury real yield fell sharply on Tuesday as traders hedging against the possibility of rising prices took hold Treasury Inflation Protected Securities TIPS Analysts said the growing demand signaled inflation concern is taking hold among investors and the public.

Fed officials said on Tuesday that high inflation will become more entrenched than previously expected.

The employment and inflation outlook will be more clarity in San Francisco Fed President Mary Daly, who said it will be mid- 2022 before there is more clarity on the employment and inflation outlook. Minneapolis Fed President Neel Kashkari said he believes the forces currently keeping people out of the labour market and pushing up prices will be temporary.

When the Fed Governor Lael Brainard met with U.S. President Joe Biden as a potential Fed Chair. She would be considered a dovish pick.

The nomination of brainard as Fed Chair Chipping at the dollar Westpac strategist is mentioned in a research note.

The dollar index goes down to the mid-93 level if it remains supportive, and the underlying picture remains a buying opportunity, they said.

The pound, hammered last week in the aftermath of the Bank of England's surprise decision to keep rates on hold, has been stable this week, and last bought $1.3357, up from Friday's more than one-month low of $1.3425.

The risk-sensitive Aussie dollar was slightly weaker at $0.73765, not too far from the lowest since October at $0.73595, reached at the end of last week.

In cryptocurrencies, the value of bitcoin hovered below the all-time high of $68,564. Last 40 changing hands were just north of $67,000 on Tuesday.

Ether traded at $4,733. There was a record peak at $4,842, which was close to Tuesday's record peak.